The Turkish lira continued its slow downtrend and reached its all-time low as traders waited for the upcoming interest rate decision. The USD/TRY exchange rate rose to 41.94, up by almost 20% from its lowest point this year. It has soared by over 450% in the last five years, Cryptorank reports.
The Turkish lira has been in a strong downtrend for decades because of the lack of independence of the central bank. Unlike in other countries, the Turkish president has the power to hire and fire the central bank at will, a role that Erdogan has used well in the past few years.
Forex analysts believe that the central bank has allowed the currency to fall as long as the decline is lower than the inflation rate.
There is a belief that a weaker lira is good for the economy as it makes its goods cheaper to other countries. Also, a weaker currency is good for the tourism industry as many foreigners, especially in locations and hotels that accept local currency.
Analysts believe that the Turkish lira will continue its freefall as it has done in the past decades. In a statement, a senior portfolio advisor at East Capital Group said:
“We believe the central bank will aim to maintain the link between the pace of inflation and the lira’s depreciation. This should result in a relatively predictable and consistent depreciation path, implying high but gradually declining real returns.”
